Open Road For Biodiesel

the energy reform efforts on Capitol Hill, and a lynch pin for ag-state Congressional

leaders. It’s lauded as flexible, renewable and more importantly, feasible. It’s the new wonder fuel.

It’s biodiesel. In addition to recent Farm Bill banter, laws have been seen in legislative hoppers from Hawaii to New York. Legislators across the country have been giving biodiesel a boost, passing laws that will have far-reaching impact on the success of the biofuel.

"The bottom line is that biodiesel is the fastest growing alternative fuel, and for good reason," says Jenna Higgins, director of communications for the National Biodiesel Board. "It’s really catching on because it’s so easy to use. You get significant emission reductions and the added benefit of it being domestically produced and renewable."

Although biodiesel was developed more than a century ago, it’s just now gaining momentum in the marketplace.

"There are very different factions which have an interest in biodiesel," says Sam McCahon, Director of Regulatory Management for the National Biodiesel Board. "Some groups, like the American Lung Association, are supportive of it for health reasons. Environmental groups support it because of its positive impact on the planet.

"Then you have the energy people who are concerned with energy security. The other large constituency is agriculture, because it’s a value-added product," he adds. "There is a synergy here – people are coming together who would ordinarily be on opposite ends of the spectrum. They want to work together to get this legislation through. It’s created a very interesting dynamic."

Federal Legislation

Three pieces of major legislation are on the table that could effect biodiesel on the national level.

o The Biofuels Air Quality Act (H.R.2088 and S.1071, pending) allows states to use federal highway grant money to purchase renewable fuels or install capital equipment for storage and distribution of renewable fuels for public, private and non-profit vehicles or fleets. It also mandates the secretary of transportation to consider projects based on the extent they reduce sulfur or atmospheric carbon emissions.

"Currently, cities that have clean air problems can use grant funds to put in fueling stations or buy cleaner-running vehicles. They can synchronize their traffic lights, put in bike paths, and do all sorts of clever things. But they cannot buy fuel," says Krysta Harden, American Soybean Association (ASA) Washington representative.

"With biodiesel the only major expense is the fuel. You don’t have to buy a new bus, put in a new fueling station or make any major adjustments. You basically splash in the biodiesel with your existing diesel," Harden says. "The bill does not mandate or create new funding; it would only allow the use of those existing funds to be used for biofuels."

o The Renewable Fuels For Energy Security Act (S.1006 and H.R.2423, pending) would require that a certain percentage of motor fuels be renewable fuels, either biodiesel or ethanol. The bill does not set a gallon-for-gallon mandate. The requirement would start at 0.8% in 2002 and reach 5% by 2016.

"As a soybean farmer, I look at it as very positive because it should really raise our prices," says Ron Sterler, a member of the United Soybean Board, Sanborn, IA. "If we could use a 2% soy-based biodiesel blend in all the diesel fuel in the U.S., we could raise the price of soybeans by about 16.5¢. So we’re reducing smog, improving air quality and strengthening the bottom line of the farmer."

o The Biodiesel Renewable Fuels Act (S.1058, pending) would provide a partial exemption from the diesel fuel excise tax. The exemption would be 3¢ for a 2% blend (prorated down to 75¢ for 0.5%) and a 20¢ exemption for B20 and higher blends.

"The bill really targets the two markets that have been very successful for biodiesel, the B20 market and the use of low blends," says ASA’s Harden. "It would work similarly to the way the excise tax exemption has worked for ethanol and the gasoline tax."

To view the progress of any piece of federal legislation, visit the U.S. Congress’ Web site at: http://thomas.loc.gov[3].

In addition to the proposed federal legislation, the Environmental Protection Agency passed a rule in January that requires diesel fuel to reduce its sulfur content from the 500 parts per million (ppm) allowed today to 15 ppm by June 1, 2006. Sulfur increases lubricity in diesel fuel, reducing engine wear. B100 naturally contains no sulfur and as little as a 1% blend of biodiesel can increase lubricity by 65%.

While federal legislation has been ramping up over the last year, state legislation has actually been in the forefront of this movement.

"It’s a vast universe of legislation out there," says McCahon.

State Legislation

Legislation in individual states falls under five basic categories:

o Tax Exemptions. The exemptions run the gamut from Montana’s and Washington’s tax breaks for capital investment in non-fossil energy generation to state excise or sales tax exemptions in Texas, Montana, North Dakota, Illinois and Hawaii.

o Fuel Requirements. Minnesota attempted to be the first state to require all diesel fuel sold be a biodiesel blend. The bill would have required state vehicles to be fueled with a B2 blend in 2002. By 2003 that requirement would extend to all diesel fuel sold in the state.

The bill stalled after the state legislature went into overtime to pass its budget and has been left in committee until next session.

Kentucky has prefiled a similar bill that would require a low blend of biodiesel be used in fuel sold within the state.

o Fleet Requirements and Incentives. Realizing that some of the largest users of diesel fuel are fleets, which return to and refuel at central locations, some states are focusing efforts on this transportation segment as an easy way to increase biodiesel use.

For example, Missouri introduced legislation reimbursing schools for incremental costs of B20 or higher blends for school buses. Iowa and Missouri have each created a self-sustaining biodiesel fund for state vehicles. This fund pays for biodiesel fuel at no cost to taxpayers. In Kansas, it is a policy for state vehicle operators to use a B2 blend.

o Studies. Arkansas, California, Minnesota and North Dakota have all issued legislative directives to study the use of biodiesel or biomass in their respective states.

o Definition. Several states have introduced or amended existing legislation to define biodiesel as an alternative fuel or declare that it meets the definition of biomass. These states include Georgia, Hawaii and Washington. This change will allow biodiesel, like other alternative fuels, to take advantage of existing programs.

The current emphasis nationwide on energy has made biodiesel the wonder fuel not only because of its roots as domestic and renewable, but because it requires little change in existing infrastructure and reduces pollutants. It’s these attributes that have contributed to its nationwide acceptance and made for some interesting champions.

For more information on biodiesel, visit the National Biodiesel Board’s Web site at www.biodiesel.org[4] . F